Business Opportunity Alternatives to

Assertion-Based Patent Monetization

Art Monk
Inflexion Point Analytics, LLC
artmonk@ip-strategy.com

Ron Laurie
Inflexion Point Strategy, LLC
ronlaurie@ip-strategy.com

IP Society Seminar
IP Monetization Strategies & Alternatives
Palo Alto November 6, 2007

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Assertion vs. Business Opportunity

Patent Monetization Models
The assertion-based patent monetization model results
from viewing a patent as an exclusionary legal right
Patent owner options:
exclude the competition (via injunction) or
tax the competition (via royalties for non-exclusive license)

Value proposition: Pay us a royalty or well sue!

The business opportunity model views a patent as a

commercial asset (like real estate or corporate securities)
Patent owner options: multiple bus-dev opportunities
Value proposition: We can both make money here.
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The Players - Assertion/Licensing Model

Single Inventor Licensing Entities:
RAKL (Ron Katz), NTP, Lemelson, Fergason

Institutional Patent Aggregators:

Offensive - Intellectual Ventures, Acacia, BTG
Defensive - Open Invention Network (IBM, Novell, etc)

Corporate Licensing Spin-outs:

GE Commercial Finance, Lucent,
AT&T Knowledge Ventures, BellSouth

Litigation Finance Funds:

Altitude, Rembrandt, NW Patent Funding, Oasis

IP/Technology Development & Licensing Companies:

Rambus, Tessera, Interdigital, AmberWave, MOSAID, MIPS, ARM, TPL
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The Players - Business Opportunity Model

Operating Companies:
- Buyers - e.g., Intel Capital, Microsoft
- Sellers - e.g., IBM, HP, Motorola

Patent Brokers:
- Pluritas, iPotential, ThinkFire, IP Value
- Semiconductor Insights, Iceberg (UK)
- Bramson & Pressman, Fairfield Resources

IP Investment/Merchant Banks:
- Inflexion Point, Ocean Tomo

IP On-Line Exchanges:
- Yet2.com, Tynax

IP Auctions (on-line and live):

- Ocean Tomo, IP Bewertungs AG, IP Auctions Inc.

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Opportunity Model Deal Types

Exclusive field-of use license(s)
Non-exclusive licenses, plus technology (know-how) transfer
Negotiated sale of patent(s)
Patent auctionsprivate vs. public
Corporate transactions involving sale or merger of entire companies,
divisions or business units
Various investment, financing and securitization vehicles

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Outright Sale
Buyer

competitor
new entrant, start-up
institutional patent aggregator (IPA)
private equity firm

Price
lump sum - cash, equity or mixed
up-front payment (or not) plus revenue share based on buyer
exploitation (w/ or w/o reversionary interest)

Reservation/grant-back ?
nonexclusive license or covenant-not-to-sue
exclusive field-of-use license
rights to improvements?

Non-compete ?
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Exclusive Field-of-Use License

Single exclusive license to all non-core applications

Multiple exclusive licenses in selected verticals
Cross-EFOU licenses to obtain exclusivity within a vertical
Grant-back rights to improvements by licensee?
Licensee enforcement issues - standing/joinder, litigation control

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Enabling-Type Non-exclusive Licenses

Non-exclusive license coupled with
Technology transfer (trade secrets, know-how)
Technical support (e.g., integration with licensee processes)

Emergence of the IP Company

No tangible product, except for digital designs
Typically 3 operating units:
R&D, IP licensing, customer support

Examples:
Rambus, Tessera, MIPS, ARM, Interdigital, AmberWave
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Corporate Transactions
Sale of company
asset sale, stock sale, forward/reverse merger, RTM
payment can be cash, equity or mixed

Divestiture of division, business unit or technology

spin-off vs. spin-out
core vs. non-core, stranded technologies
IP allocation is usually a contentious issue!

Merger of Equals (MOE)

Joint Venture
contractual vs. Newco
two-stage hybrid
IP may be a JV members sole contribution

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IP-Backed Financing
Using IP to obtain operating capital from institutional lenders
Collateralization
Sale and license-back (off-balance sheet loan)

Securitization of future royalty streams

Examples: Bowie Bonds, Bio-Pharma Trust
Historically limited to copyright properties & bio/pharma
Requires established licensing revenue stream

Sources
Ocean Tomo, UCC Capital, IP Innovation Financial Services

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Defensive Monetization
Via Strategic Patent Acquisition

Acquisition of patents having strategic value,

i.e., those covering products and markets representing
substantial revenue streams of major competitors
can be used to minimize or eliminate cash outflow by
reducing cross-license balancing payments
resolving patent infringement claims & settling litigation
deterring infringement claims or litigation (MAD)
Strategic acquisition is based on a pain-point analysis of the
competitors products and markets - the most effective patents may
have nothing to do with the acquirors business, e.g., where the
acquiror is a major player in a niche market and its primary competitor
in that market is a broadly based manufacturer.
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Concluding Thought

When all you have is a hammer,

everything looks like a nail.
Think creatively about monetizing IP assets
talk to an IP investment banker

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Contact Info:
Inflexion Point Strategy, LLC
706 Cowper Street, Suite 200
Palo Alto, CA 94301
Tel: (650) 327-6400
Fax: (650) 745-1170
www.ip-strategy.com

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